MNI BoJ Review - July 2022: As You Were Despite Short-Term Noise

EXECUTIVE SUMMARY

• The BoJ left its monetary policy settings unchanged at the end of its July meeting, as was universally expected, while it noted that it will continue the daily fixed rate operation schedule and chose not to make a decision regarding the future of the special loans for small firms facility. There was the familiar 8-1 vote split (Kataoka being the usual dovish dissenter) surrounding the top line monetary policy settings. The BoJ also maintained its forward guidance surrounding interest rates.
• The Bank’s headline and core CPI forecasts were marked higher alongside a downgrade to the GDP projection covering the current FY (as expected) and a related nudge higher for the growth projections covering the two FYs that follow the current FY. The Bank noted that inflation expectations have risen, while it highlighted the risks that FX market gyrations and commodity price
• All in all, the Bank’s maintenance of its on-hold stance in recent months, inflation forecast dynamics and Kuroda’s tone continue to point to a Bank that will not tighten monetary policy during the remainder of Kuroda’s term, which runs into April ’23. The July meeting represented the last outings for board members Kataoka and Suzuki, with the former’s departure set to provide a slightly less dovish tinge to the BoJ decisions given the fact that he served as the guaranteed dovish dissenter.
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